Buying in Riverside and renting the rooms out to UCR students

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partnersincrime_IHB

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I have some money saved up and wanted opinions of fellow members here of the idea of buying a house in Riverside (this would be my first house) and renting the rooms out to UCR students.

Assuming the UCR students are well behaved and clean (best case scenario), will I receive any tax breaks from doing this (if I live elsewhere rent free)?
 
partnersincrime said:
I have some money saved up and wanted opinions of fellow members here of the idea of buying a house in Riverside (this would be my first house) and renting the rooms out to UCR students.

Assuming the UCR students are well behaved and clean (best case scenario), will I receive any tax breaks from doing this (if I live elsewhere rent free)?
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You will be able to claim the home as your rental property and it will go on your schedule E. Depending upon what the depreciation on the home will be, you will most likely have a tax loss which you will be able to offset against your wage income if you actively manage the property. When you do your calculations be sure to include a vacancy factor (1-2 months of the year) and include a 1-2% maintenance reserve of the price of the home. Be sure that you have run rental comps for the area that you plan on purchasing so you know what a fair rent is to charge. With students tenants, you may want to get one of the parents on the hook for the lease.
 
partnersincrime said:
Thank you for your reply. I am currently in the process of evaluating the rental comps and sold home prices in the UCR area.
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No problem. PM me if you want me to pull you some closed MLS rental comps.
 
As a Riverside resident who admittedly has not done this, I personally believe that there is significant profit in such an idea. Rents are significantly higher than monthly payments here, although having a professional such as USC confirm this is, of course, a very good idea. The area you probably want to concentrate on is labeled "Belvedere Heights" on maps, although nobody actually calls it that in the real world.
 
USCTrojanCPA said:
partnersincrime said:
I have some money saved up and wanted opinions of fellow members here of the idea of buying a house in Riverside (this would be my first house) and renting the rooms out to UCR students.

Assuming the UCR students are well behaved and clean (best case scenario), will I receive any tax breaks from doing this (if I live elsewhere rent free)?
Click to expand...
You will be able to claim the home as your rental property and it will go on your schedule E. Depending upon what the depreciation on the home will be, you will most likely have a tax loss which you will be able to offset against your wage income if you actively manage the property. When you do your calculations be sure to include a vacancy factor (1-2 months of the year) and include a 1-2% maintenance reserve of the price of the home. Be sure that you have run rental comps for the area that you plan on purchasing so you know what a fair rent is to charge. With students tenants, you may want to get one of the parents on the hook for the lease.
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Unless things have changed a lot since I was in school, shouldn't you assume a larger vacancy factor (maybe 4 months) because you are targeting college kids. When I was in college, the neighborhoods where students rented were ghost towns in the summer.
 
xoneinax said:
If the market will bear it, require a one-year lease
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Stronger markets like Westwood or Fullerton or near USC will bear it. Riverside probably won't. Likely stuck with a 9 month lease.
 
Joe33 said:
xoneinax said:
If the market will bear it, require a one-year lease
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Stronger markets like Westwood or Fullerton or near USC will bear it. Riverside probably won't. Likely stuck with a 9 month lease.
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That may be somewhat true, but I know there are a significant amount of students that do take summer classes (I did for 2 years). I'm thinking that most landlords up there would require/highly prefer a 12-month lease agreement (I'd have to verify via rental listings and closings) and like I said it would be in the landlords best interest to get one or more of the parents on the lease agreement just in case. Obviously you also have the option of renting to non-students as well.
 
12 month leases are the norm near UCR. I know a number of professors who make very good money by renting places to students; but they mostly rent to graduate students of professors they know which gives them a huge advantage in tenant selection.
 
This Riverside house just came on the market. It's not particularily near UCR, but I think it gives a good example of how rents are compared to purchase prices in the city, since it's currently rented.

4539 Park Ave

4539 Park Ave Ave

Riverside, CA 92507

Price: $99,000

Beds: 2

Baths: 1

Sq. Ft.: 860

$/Sq. Ft.: $115

Lot Size: 4,356 Sq. Ft.

Property Type: Single Family Residence

Style: Bungalow

Stories: 1

Year Built: 1900

Community: Riverside

County: Riverside

MLS#: P705435

Source: SoCalMLS

Status: Active

On Redfin: 1 day

New Listing (24 hours)

Newly renovated home inside and out. Home is historic. Currently the property is leased to a tenant but it can be delivered vacant at Buyer request. The rent is $1,050 per month/ $12,600 per year. Home buyer or investors welcome.

So, that's a GRM of only 94.3.
 
It would have been better if you were the investor who bought it from the bank for $55k. I thought $150 a sqft. was the bottom in Riversas? Mmmm.
 
graphrix said:
It would have been better if you were the investor who bought it from the bank for $55k.
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$55K is actually a price I could afford to pay at an auction. I wonder if there are similar priced homes going on auction at the courthouse in Riverside.

What would be really nice is if there was a website that should a crime map of Riverside? That way you can tell which areas are really bad and are prone to vandalism.
 
graphrix said:
It would have been better if you were the investor who bought it from the bank for $55k. I thought $150 a sqft. was the bottom in Riversas? Mmmm.
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The city average is $122 a square foot right now, according to Redfin. It bottomed at about $110 a sq ft.

financeguy said:
graphrix said:
It would have been better if you were the investor who bought it from the bank for $55k.
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$55K is actually a price I could afford to pay at an auction. I wonder if there are similar priced homes going on auction at the courthouse in Riverside.

What would be really nice is if there was a website that should a crime map of Riverside? That way you can tell which areas are really bad and are prone to vandalism.
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The example house I posted is in what I consider a high crime area. The city does have such a map for reference:

Link

Unfortuantly, it's hard to really use that data, since the different reporting districts are of arbitrary sizes and populations. Interestingly, crime seems to be falling significantly in all areas of the city.

As for finding houses for fifty grand, they seemed to be common a few months ago. I'm not sure if that's still the case.

The three areas nearest UCR are Eastside (higher crime, cheaper houses), Belvedere Heights (lower crime, more expensive houses), and Canyon Crest (lower crime, but quite expensive houses (for Riverside)). I think Canyon Crest is probably too expensive for a rental of this sort.
 
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